Tourlite Fund, LP experienced a slight downturn in the third quarter of 2025, recording a negative return of 2.0%. Despite this recent dip, the fund's year-to-date performance remains positive at 2.7%. Since its inception, Tourlite has delivered an annualized return of 8.6%, showcasing its long-term strategy of leveraging both long and short positions to generate alpha. This approach prioritizes capturing the spread between these positions over relying on broad market movements. The fund focuses on identifying and investing in high-quality businesses with strong fundamentals and growth catalysts, while simultaneously shorting companies expected to decline due to deteriorating financials or unsustainable models. The current market environment, characterized by speculative trading and liquidity-driven price movements, presents both challenges and unique opportunities for disciplined, fundamentals-based investors.
In a detailed letter to its partners, Tourlite Capital Management elaborated on its performance and market outlook. The letter highlighted that periods where market price action is dictated more by speculative narratives, retail investor activity, or sheer liquidity, rather than underlying fundamentals, make it increasingly difficult to realize the intended spread between long and short positions. The firm noted instances of speculative companies, even those with eroding fundamentals and declining earnings estimates, outperforming in such environments, sometimes seeing gains exceeding 200% year-to-date. These dynamics, while challenging, simultaneously create significant opportunities for discerning investors as the divergence between a company's intrinsic value and its market price expands.
The management further pointed out a resurgence of speculative rallies in lower-quality stocks, reminiscent of the late 2021 market conditions. Bloomberg data for the third quarter showed a negative performance for both Value and Quality factors, underscoring the prevalence of lower-quality companies leading the market. While acknowledging elevated valuations, Tourlite does not view this as the primary concern, given positive earnings growth and a resilient broader economy. Instead, the firm is more focused on the emerging bubble in speculative sectors such as quantum computing, nuclear energy, eVTOLs, and drones, where valuations seem detached from reality. This scenario, they believe, is laying the groundwork for a significant opportunity for short sellers, though timing remains critical.
Tourlite maintains a selective approach to short selling, actively managing volatility and positioning the portfolio to capitalize on the eventual market correction. The fund’s average net beta-adjusted exposure for the quarter was 5%, with gross exposure fluctuating between 136% and 185%, averaging 166%. The management reiterates its optimal net exposure target of 20-30% for portfolio construction. Sector-wise, the portfolio demonstrated concentrations in consumer (around 22%), industrials (approximately 43%), technology (about 16%), and other sectors (around 19%), which predominantly include special situation healthcare investments. The firm’s strategic short positions in the consumer sector and long positions in industrials remain unchanged, with average dollar exposures reflecting these allocations.
Among its new long positions, Tourlite emphasized TIC Solutions, a provider of asset integrity services, as a promising investment. The firm draws parallels between TIC Solutions and APi Group, a former successful holding, citing their similar operational characteristics in regulatory-driven, recurring service industries with strong free cash flow generation. The recent acquisition of NV5 by TIC Solutions is expected to drive substantial cost synergies and cross-selling opportunities, mirroring APi Group's successful integration of Chubb Fire & Security. For existing holdings, FTAI Infrastructure (FIP) and FTAI Aviation (FTAI) were highlighted for their significant value creation potential. Despite an initially negative market reaction to FIP’s transformative transaction involving the acquisition of Wheeling & Lake Erie Railway Company, Tourlite sees substantial upside, particularly with ongoing catalysts like new cavern permits for Repauno and a potential data center agreement at Long Ridge. FTAI Aviation is also poised for growth with strong fundamentals and upcoming catalysts such as an investor day and potential new product approvals.
Tourlite Capital Management expressed gratitude to its partners for their ongoing trust and collaboration. The firm reiterated its commitment to its disciplined investment philosophy and remains optimistic about future opportunities despite the current market complexities. The management team encouraged partners to reach out with any questions, emphasizing transparency and open communication regarding the fund's strategies and performance.
